New York Elder Law Attorney Blog

A Medicaid Asset Protection Trust (MAPT) is one of the best tools available for seniors who do not have long-term care insurance to protect their assets from the staggering cost of nursing home care. This weekend our New York elder law attorney, Bonnie Kraham Esq., had a story published in the Times Herald-Record where she explained the value of this trust for local residents. The article highlighted the specific ways that a MAPT can help local seniors save assets for their family and dispelled misconceptions that some have about creating the trust.

A MAPT is a legal entity that a resident creates with the help of a professional to protect assets from being consumed in order to pay for long-term caregiving costs in the future--usually nursing home care. To create the trust, a resident transfers assets (such as the family home) into the separate legal entity and names someone other than themselves or their spouse as trustee to manage the assets in the trust. The senior may then be able to keep those assets down the road while still qualifying for Medicaid assistance if needed to pay for nursing home care.

Contrary to some misperceptions, local seniors who create a New York Medicaid Asset Protection Trust do not forever "lock up" all of their assets or lose the power to alter what happens to their property. The lifestyle of the senior who creates the trust is usually unaffected, because they still receive pension checks and Social Security checks directly, and they retain the exclusive right to use their home just as before while keeping their home tax exemptions. These trusts are irrevocable, but New York law actually allows the trust to be revoked with written consent of all involved parties. In addition, the individual who creates the trust can amend it to change the beneficiaries at any time.

Medicaid has a five-year "look back" period which makes it important for all residents to contact a New York elder law attorney as soon as possible to discuss this option. So long as five years has passed since the creation of the trust, the assets within the trust will be completely protected. However, even if nursing home care is needed within five years of the trust's creation, a senior gets credit for the time that has accumulated. Therefore, while an early start is beneficial, no senior should put off the creation of a MAPT because of fears of being too old.

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Earlier this year Congressional hearings were held on the often forgotten problem of elder financial exploitation. Federal officials are still considering a variety of legislative options to protect victims of these crimes and hold wrongdoers properly accountable. Our New York elder law attorneys know that many residents in our area fall victim to predatory actions that often deplete resources built up over a lifetime. The problem takes many forms, from identity theft and scams to manipulation by trusted caregivers. Surprisingly, much financial abuse is perpetrated by friends and family members who exploit the senior's vulnerability for personal enrichment.

While legislative actions may be helpful to better protect seniors from this exploitation, the first line of defense is proper individual financial preparation. Taking proactive steps to minimize the risk of being taken advantage of is the best way each individual resident can protect themselves. For example, a comprehensive story at TBO News explained this week that identity theft can usually be prevented if simple steps are followed. This includes refusing to give personal information over the telephone, deleting unsolicited emails that ask for personal information, and not carrying Social Security cards and multiple credits cards at the same time. Additionally, seniors should be sure to shred personal mail, stop mail before going on vacation, be cautious with online shopping, and frequently review financial statements.

While identity theft is a common fear, most seniors are much more likely to be financially exploited by family and friends. To guard against this mistreatment, local advocates agree that it is important to have a New York elder care plan in place so that trained eyes are aware of your financial situation. Beyond that, simple steps can help to limit one's risk of being victimized. It remains important never to give blank checks for others to fill in the amount, sign complicated papers that you don't understand, or give others unlimited access to financial information. In addition, seniors should always work with their banks to control who has access to funds.

It is always preferable for local seniors to prevent the exploitation before it occurs. Our New York elder law estate planning attorneys are able to help residents put plans into place that can act as a layer of protection against unwanted financial tampering. There is no better way to feel protected than by building strong relationships with professionals who handle your financial affairs. No matter what, seniors who are victimized in any way should contact local law enforcement officials. New York elder financial abuse is woefully underreported. This makes it difficult for advocates to identify the scope of the problem or take steps to help those who have been hurt.

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The current high cost of nursing home care makes it important for residents to plan ahead to determine how they will pay for these services. In fact, with nearly 75% of local residents over 65 years old likely to need long-term care at some point, creating an elder care plan is becoming a virtual necessity. Nursing home costs in our state are consistently near the most expensive in the entire country, and so many community members visit our New York elder law attorneys to learn about their options to prepare for this expensive care.

According to an article in yesterday's Smart Money, recent federal cuts to many long-term care facilities throughout the country may result in even higher nursing home costs. The possible increases are linked to a decision from the Centers for Medicare and Medicaid Services (CMS) which announced late last month that it will begin cutting reimbursement rates to these facilities by 11.1%. CMS officials explained that the step was necessary to make up for a $4 billion shortfall last year. This reimbursement reduction will take place beginning in October. Many observers believe that the change will indirectly pressure many of these facilities to increase the cost on residents to make up for the shortfall. The CMS cost-cutting measure has spooked already jittery investors who worry that their profits will shrink as a result of the change. Even before this announcement the cost of local nursing home care increased 5% this year from last year.

Unfortunately, some also suggest that even with the price increase, services at these homes will likely be cut. Medicare payments are responsible for 20% of revenues for the average nursing home. Considering that many of these facilities are run by public companies with shareholders, there will be strong pressure to cut costs in any way possible to make up for the revenue reduction. Many fear that nursing home quality will be affected.

No matter what happens it is important to remember that nursing home residents can always seek to negotiate for extra amenities or a room upgrade. Public websites like Medicare.gov are a helpful starting point to compare nursing home costs and features. Residents in our area should also be aware that with proper New York elder planning they can take steps to ensure that they have the resources necessary to avoid nursing homes altogether and receive care in their own homes. In addition, if a condition arises where a nursing home stay is unavoidable, a proper elder law plan can ensure that assets built up over a lifetime are not spent paying for the staggering cost of this care.

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An unavoidable statistical reality is that area women may be much more affected by New York elder law and estate planning issues than men. Demographics and life patterns are at the heart of the explanation. Women have a longer life expectancy and more often marry older companions. This explains how of all Americans over 65 years of age, 42% of women but only 14% of men are widowed. On top of that, women still have lower average lifetime earnings.

Those characteristics have profound effects on the lives of many women in our area. As explained Thursday in a newly published Forbes article, women are much more likely than men to face compromised living situations following retirement. However, those who have taken time to conduct proper New York estate planning have a better chance at avoiding major decreases in living standards in their later years.

Many ways exist for a surviving spouse to maximize their financial protection, no matter what their future holds. In fact, the tools to plan for the future are frequently in flux.

For example, federal estate tax changes enacted late last year offer new opportunities and risks for spouses to ensure their assets are protected and preserved in as efficient a way possible. For one, starting this year there are new rules for the amount of unused estate tax exclusion a surviving spouse can add to their own. This "portability" option may double the amount of money that a spouse can pass on to heirs untaxed. However, the portability does not automatically occur. Without proper planning, some spouses may fail to take advantage.

Continue reading "New York Elder Law Estate Planning is Particularly Important for Women" »

Unfortunately current economic hardships may exist more acutely for the LGBT elder community because of a lifetime of federal law discrimination that has affected their financial security and health care options. Of all the so-called financial safety nets, including Social Security and retiree health insurance benefits, the harshest effects on aging LGBT Boomers is Medicaid. To be eligible in New York for state nursing home assistance, certain asset and income level requirements exist whereby qualified applicants must be deemed impoverished.

New York State Medicaid allows the spouse of a person receiving Medicaid - "the community spouse" - to keep certain assets including the family home to protect against total impoverishment. Because marriage rights are not granted to same sex couples in New York, they cannot take advantage of this provision.

On the other side of the coin, the inability of same sex couples to marry in New York offers a distinct Medicaid planning advantage in later years. If you are in a same sex partnership and wish to plan ahead five years to protect your jointly owned home and life savings from nursing home costs, and cannot obtain long-term care insurance for any reason, you may both establish a Medicaid Asset Protection Trust for one other. Legally married couples may not name each other as the trustee in a MAPT. Same sex partners, however, are able to name one another as each other's trustee and therefore do not have to go outside of the relationship to put someone else in charge in order to protect assets. A New York elder law attorney who has familiarity with the underserved legal needs of the LGBT community can best advise whether or not a MAPT is a viable financial solution in a given situation.

by A.K. Lehmann, ABA Paralegal
Lehmann & Lehmann Legal Communications

By Michael Ettinger, Esq.

A power of attorney will assist you in the event of possible physical incapacitation.
This means someone else can handle your legal and financial affairs that might require your physical presence, such as a real estate closing or refinancing. Later in life, it is imperative that you have your own plan for disability because

You get to choose the people you want to make decisions for you, be it family or friends, and

Your own power of attorney legal document affords them many more options than a legal guardian would have under the law to protect assets. For example, they can move much more in assets more quickly which, in a "move it or lose it" environment is crucial. Nursing homes in New York cost an average of $10,000 a month so the sooner you act, the more of your assets you are able to keep.

A legal guardian has to get a Judge's permission to move or protect assets which can take many months, not only possibly costing tens of thousands in nursing home costs, but potentially the same amount in legal fees to prosecute the matter. Worse yet, after all the time, expense and effort, a Judge may not act in your best interest because sometimes the Judge has a different view of the matter politically or considers the State's interests ahead of those of your family. If you have a power of attorney in the event of disability, the people you have chosen will do what's best for you.

In New York, a Judge has the authority to cancel a power attorney and substitute someone else of the Judge's choosing as your legal guardian. By creating a trust, however, you can completely protect against this. If you have a trust set up, where you name a back-up trustee or trustees, this defeats a guardianship proceeding for the trust assets. The Judge has no authority over the trust, so you are guaranteed to get the persons you choose. If you are unable at present to decide upon specific persons to act as your "power of attorney," you may ask your elder law attorney to perform trustee duties.

Get the person(s) you choose to make difficult financial and legal decisions for you in the event of disability. This often makes the difference between keeping your home and life savings and losing them. A New York elder law attorney can assist in the proper drafting and execution of a power of attorney.

by Michael Ettinger, Esq.

Medicaid annuities have been a viable planning option for New York spouses since The Deficit Reduction Act of 2005.

Say you have a spouse who needs nursing home care (the "institutionalized spouse") but you have more assets than the Medicaid law allows you, the spouse at home (the "community spouse") to keep. Currently, the community spouse may keep about $125,000 in resources (not including the house, which is exempt if a spouse is living there). But what if the couple has $400,000 in assets? That's $275,000 in excess resources.

Many well meaning advisers, including lawyers, will tell you that it is too late and you have to first spend down that $275,000 before Medicaid will pay. Not correct.

Elder law attorneys have a number of good planning options here. One, spousal refusal was the subject of an earlier blog post.

Another planning option, the Medicaid annuity, may in some cases turn out to be the best planning option.

The community spouse purchases a Medicaid annuity worth the excess $275,00 which must make repayments of the full amount of the annuity plus interest with the community spouse's actuarial life expectancy. Now, the $275,000 has disappeared and the institutionalized spouse is immediately eligible for Medicaid, saving nursing home costs of $12,000 or more per month. Spouse at home receives an increased income which is also almost all sheltered from Medicaid.
What if the spouse at home dies first, or before all the payments are made? The children may be named the beneficiary and receive the balance of the payments.

by Michael Ettinger, Attorney at Law
The Medicaid Asset Protection Trust (MAPT) is a technique commonly used by elder law attorneys. It consists of an irrevocable trust, usually set up by a parent of parents sixty-five and older. One or more of the adult children are named as "trustees" to manage the trust for the benefit of the "beneficiaries" who remain the parents during their lifetimes. For example, the parents retain the right to the exclusive use and enjoyment of the home and the income from all of the trust assets. The establishment and "funding" of the trust, i.e. retitling the home and the investments in the name of the trust, starts the five year look-back period running. After five years, those assets become exempt and are protected from the costs of long-term care.

Once the MAPT is established, there are certain things the parties can and cannot do. Below are a list of the "Do's and Don'ts" concerning the MAPT.

Do make all transfers to your trust, as advised by the law firm, in a timely manner.
Do use trust assets for repairs or improvements to the home or other property in the trust.
Do use trust assets for payment of real estate taxes and homeowners insurance.
Do take dividends and income on trust assets on at least a quarterly basis.
Do call the law firm when you wish to make a gift from the trust to any of your beneficiaries.
Do call the law firm when a Grantor needs Medicaid benefits or dies.
Do call the law firm when personal or financial circumstances change significantly.
Do call the law firm if you wish to change trustees or break the trust.
Do provide your homeowner's insurance company with the "letter of instruction" and a copy of the trust for real property transferred to the trust.
Do provide your CPA or tax preparer with the "letter of instruction" regarding the trust tax return
and the "letter of instruction" tax deductibility of legal fees.
Do choose your trustee carefully to avoid the expense (and unpleasantness) of changing
the trustee.
Do call the law firm if you want to take out a reverse mortgage on the property in the trust.

Don't use trust assets to pay telephone or utility bills.
Don't use trust assets to pay personal expenses.
Don't use trust assets to purchase an automobile.
Don't take principal or capital gains from trust assets.
Don't transfer IRA's or 401(k)'s to the trust.
Don't allow beneficiaries to return to the trust or the Grantor any gifts made from trust assets.
Don't make additional transfers to the trust without advising the law firm.

by Michael Ettinger, Esq.
A reverse mortgage, also known as a Home Equity Conversion Mortgage (HECM), allows seniors, age sixty-two and older, to tap the equity in their homes. The demand for these loans is exploding due to the lingering effects of the recession and the leading edge of the boomer generation reaching retirement age.

The attractiveness of these loans are that no payments are made on the loan until the home is sold, the last owner vacates for assisted living or nursing home care or the last owner dies. After death, the loan repayment terms allow an additional twelve months for estate administration and probate.

The difference between the sale price and the loan goes to the heirs under the will or living trust. If the home sells for less than the loan, the estate owes nothing since these loans are covered by insurance, taken out by the borrower, to repay the lender for any shortfall. While the insurance adds 2% to the cost of the loan, the mortgage insurance fee is tax deductible.

Although about half of reverse mortgages are taken out to pay off existing mortgages, thereby eliminating payments, there are other options besides taking a lump sum. Borrowers may also take out a line of credit or receive a monthly check for a term certain, such as ten or twenty years, or for life. Proceeds are received tax-free. Since the loan is based solely on the equity in the home, there is no income check or credit check required.

The amount that you may borrow depends on your age and the value of the property. For example, maximum loan amounts on a fixed rate mortgage for home values up to $625,500 or more are $324,070 for a sixty-two year old and $384,850 for a seventy-five year old. Homes of lower values receive proportionately less loan amounts.

Due to the high cost of the mortgage repayment insurance (2%) and the loan origination fee (2% of the first $200,000, 1% of amounts over $200,000, with a cap of $6,000), these loans are not recommended where the homeowner may move or sell in a few years or is at risk for long-term care and may need Medicaid planning. Once a reverse mortgage is placed on a home, it is not amenable to being protected from nursing home costs with a Medicaid Asset Protect Trust.

A consultation with an experienced elder law attorney can help you weigh the pros and cons of going forward with a reverse mortgage, as well as available alternatives, such as home equity loans, selling the home and trading down, or opting to rent.